LETTERS TO THE EDITOR (Consignia & competition)
IMPORTANT THAT CONSIGNIA COMPETES IN A FAIR MARKET
From Geraint Davies MP.
Sir, Having interviewed the postal market regulator on two occasions, I was surprised to read the editorial comment “Delay in postal delivery” (March 21), which slavishly supported Postcomm’s bid to liberalise the UK postal market in a way and at a pace completely out of step of the rest of the European Union. It ignored the recent National Audit Office report “Opening the Post”, which acknowledges the threat to our universal postal service as a reasonable and uniform tariff from accelerated competitive access.
It is important that Consignia is able to compete fairly and effectively in a harmonised single market and not face unfair competition. If market access to postal services is provided to our European competitors without reciprocal opportunities for Consignia, the company will face tremendous unnecessary pressure at a time when it is already planning 30,000 job losses through restructuring.
Obviously competitors will cherry pick. For instance, to offer a universal service they might deliver 90 per cent and simply put a Royal Mail stamp on the more rural 10 per cent allowing Consignia to cover the fixed costs. Your editorial claims that “rural services more than cover their direct costs, so even if competitors chopped off all the urban mail, what remained could still be profitable”. But if the urban mail is currently covering all indirect costs so that rural services only have to cover direct costs, then when competitors chopped off all the urban mail, rural services would no longer be economic. In other words, Postcomm’s economic analysis is fundamentally flawed.
Stamp prices in the UK are dramatically below those in the rest of Europe and nine out of 10 of the public believe they have a good service. Postcomm should bring its proposals in to line with the rest of the EU so that a gradual liberalisation of price and weight will avoid serious structural risks to the UK postal service.
We all want to see efficiency and value for money, but let us not allow unfair competitive access to undermine Consignia’s ability to deliver a universal service at a reasonable, uniform price.
Geraint Davies, House of Commons, London SW1
LETTERS TO THE EDITOR: ANALYSING COST OF UNIVERSAL POSTAL SERVICE (28.3.02)
From Mr Graham Corbett.
Sir, Geraint Davies MP complains (Letters, March 26) that Postcomm’s economic analysis is fundamentally flawed.
Not so. We have consistently argued that the cost of the universal service needs to be looked at both in terms of its direct cost and the loss of overhead contribution as market share is lost.
These issues were discussed in two detailed papers, one published by us last June and the second, on the effect of loss of market share, published this January. It was that study that led Postcomm to conclude that “Consignia can do more harm to its financial viability by failing to become efficient than competition can do by taking away business”. Consignia’s announcement of radical action to reduce its cost base is a welcome step in recognising this.
Mr Davies also argues that competition needs to be introduced at a speed that gives Consignia time to adjust. We agree – and are taking careful note of his and others’ representations on this issue. We hope to announce our final decisions towards the end of May.
Graham Corbett, Chairman, Postcomm, London SE1 7DB
Copyright © 2002: Financial Times Group
